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Judgment
Per Mahavir Singh, Vice President:
These appeals by the assessee are arising out of the order of Addl./JCIT(A)-9, Mumbai in appeal No.NFAC/2013-14/10040611, order dated 23rd April, 2026. The order under Section 201(1) read with Section 201(1A) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was passed by the Income Tax Officer, Ward-73(1), New Delhi for the financial year 2013-14 vide order dated 31st March, 2021.
ITA No.6794/Del/2026
At the outset, learned Counsel for the assessee drew our attention to the application filed by the assessee under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 dated 12th September, 2026, wherein the assessee has raised the issue of limitation. The additional ground raised reads as under:-
"That on the facts and in the circumstances of the case and in law, the order dated 31.03.2021 passed under Section 201(1) r.w.s. 201(1A) of the Act by the ITO Ward 73(1), New Delhi is illegal, without jurisdiction, bad in law, and barred by limitation. Hence, the same is liable to be quashed."
Learned Counsel for the assessee stated that this is purely a legal issue and all the facts involved in this issue are on record and no new facts are to be investigated for the purpose of adjudication of this ground. Hence, in view of the decision of Hon'ble Supreme Court in the case of National Thermal Power Company Limited Vs. CIT – 229 ITR 383 (SC), the additional ground be admitted and adjudicated.
When these facts were confronted to the learned Senior DR, he contested the admissibility of the additional ground but could not controvert the fact situation.
We have heard the rival contentions on the admissibility of additional ground under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 and noted that the ground raised is purely legal in nature and arising out of the facts available on record on the order passed by the Assessing Officer. Therefore, in view of the decision of Hon'ble Supreme Court in the case of National Thermal Power Company Limited (supra), we admit this ground and adjudicate it accordingly.
The brief facts leading to the above issue are that the assessee company has paid a sum of ₹8,71,25,500/- as External Development Charges (EDC) to HUDA during the financial year 2013-14 and, according to the Assessing Officer, the payment made to HUDA by the assessee on account of EDC charges is liable for TDS under Section 194C of the Act. Since the assessee has not deducted TDS on the payment made as EDC charges to HUDA during the financial year 2013-14, the Assessing Officer passed order under Section 201(1) read with Section 201(1A) of the Act vide order dated 31st March, 2021. Learned Counsel for the assessee filed the chronology of dates with brief notes, as under:-
| Date | Particulars |
|---|---|
| 09.01.2014 | External Development Charges ('EDC') amounting to Rs.8,71,25,500 were paid to HUDA during FY 2013-14 relevant to AY 2014-15. Accordingly, the alleged obligation to deduct tax at source under section 194C, if any, arose during FY 2013-14. |
| 31.03.2014 | FY 2013-14 came to an end. The limitation for passing an order under section 201(1) is required to be examined with reference to the provisions of section 201(3) applicable to the said financial year. |
| 01.10.2014 | The amended section 201(3), prescribing a uniform limitation period of seven years from the end of the financial year in which payment/credit was made, came into force from this date. The amendment became effective during FY 2014-15, corresponding to AY 2015-16. The impugned EDC payment, however, had already been made on 09.01.2014 and pertained to FY 2013-14/AY 2014-15. Accordingly, the Appellant's contention is that the subsequently enlarged seven-year period cannot be retrospectively applied to the transaction pertaining to the preceding financial year. |
| 31.03.2020 | The six-year limitation period under section 201(3), as applicable to FY 2013-14, expired on this date. Even assuming applicability of the longer six-year period, an order under section 201(1) in respect of the alleged default pertaining to FY 2013-14 was required to be passed on or before 31.03.2020. |
| 24.03.2021/ 26.03.2021 | The Assessing Officer issued notices seeking information regarding deduction of tax at source on the EDC payment pertaining to FY 2013-14. Thus, the proceedings were taken up only in March 2021, after expiry of the six-year limitation period on 31.03.2020. |
| 31.03.2021 | The Assessing Officer passed the impugned order under sections 201(1)/201(1A) in respect of the EDC payment of ₹8,71,25,500 pertaining to FY 2013-14. The order was therefore passed one year after expiry of the applicable limitation period on 31.03.2020 and is accordingly contended to be barred by limitation. |
In view of the above facts, the learned Counsel for the assessee drew our attention to the provisions of Section 201(3) of the Act as amended by the Finance Act, 2012 with retrospective effect from 1st April, 2010, and the relevant provisions read as under:-
(3)No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of-
(i)two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed;
(ii)six years from the end of the financial year in which payment is made or credit is given, in any other case:
Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. Learned Counsel for the assessee relied on the provisions of Section 201(3) of the Act.
On the other hand, the learned Senior DR relied on the assessment order and the order of learned CIT(A) and stated that the order passed by the Assessing Officer is within the stipulated period and even if this is a curable defect.
Having heard the rival contentions and going through the facts of the case, we noted that the facts are undisputed as given by us in paragraph 6 above. We noted that Section 201(3) of the Act is a newly inserted provision by the Finance (No.2) Act, 2009 and subsequently amended retrospectively with effect from 1st April, 2010 by the Finance Act, 2012 lays down that no order under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of six years from the end of the financial year in which payment is made or credit is given, in any other case. It means that the upper limit given is six years from the end of the financial year in which payment is made or credit is given for passing an order under Section 201(1) of the Act. Going by the facts of the present case, admittedly, external development charges amounting to ₹8,71,25,500/- were paid to HUDA during financial year 2013-14 and accordingly, the obligation to deduct TDS at source under Section 194C, if any, arose during financial year 2013-14 only. The financial year 2013-14 came to an end on 31st March, 2014. It means that the limitation for passing of an order under Section 201(1) is to be examined with reference to the provisions of Section 201(3) as applicable to the relevant financial year. The six year limitation period ends on 31st March, 2020 in the present case under Section 201(3) of the Act. The Assessing Officer admittedly passed order only on 31st March, 2021. It means that the order passed by the Assessing Officer under Section 201(1) is barred by limitation and accordingly, the same is quashed.
Coming to the issue on merits, whether TDS is to be deducted on EDC charges, since we have adjudicated the issue on jurisdiction and quashed the assessment order as barred by limitation, the issue on merits has become academic and need not be adjudicated. The same is accordingly dismissed.
In the result, the appeal of the assessee is allowed in terms of the above.
ITA No.6795/Del/2026
The only issue in this appeal of the assessee is as regards the order passed by the Additional CIT(A) upholding the order passed by the Assessing Officer under Section 201(1) and 201(1A) of the Act treating the assessee as an assessee in default for non-deduction of TDS under Section 194C of the Act on EDC paid to HUDA amounting to ₹4,94,19,100/-.
The brief facts are that the assessee company is engaged in the business of construction and sale of multistoried residential/commercial buildings and complexes, promotion and development of residential colonies and other real estate projects since 1983. The revenue of the company is generated from two segments namely, 'Development of Real Estate and from Restaurants (Hospitality)'. The Assessing Officer received information that M/s JSG Builders Pvt.Ltd. had paid External Development Charges (EDC) to HUDA on which TDS was not deducted as per provisions of Income Tax Act, 1961, details of which are as under:-
| Nature of payment | Date of payment | Amount |
|---|---|---|
| EDC amount paid to HUDA | 24.03.2015 | Rs.2,44,54,100/- |
| EDC amount paid to HUDA | 25.06.2014 | Rs.2,49,65,000/- |
| Total | Rs.4,94,19,100/- |
The Assessing Officer, on further verification of proceedings noted that M/s JSG Builders Pvt.Ltd. vide letter dated 23rd March, 2021 stated that it has sold its land vide Sale Deed dated 8th November, 2013 and has not made any payment to HUDA on account of EDC during the FY 2013-14. The perusal of sale deed dated 8th November, 2013 reveals that M/s JSG Builders Pvt.Ltd. had sold its property (at Wazirpur, Gurugram) to M/s Ansal Housing & Construction Ltd. and M/s Samayak Project Pvt.Ltd. The TAN of the case M/s Ansal Housing & Construction Ltd. being in the Circle-73(1), the information was shared to this office. Accordingly, a show cause notice dated 9th March, 2022 was issued to the assessee requiring him to explain as to why TDS was not deducted on EDC charges paid to HUDA during financial year 2014-15 and as to why the assessee should not be treated as assessee in default under Section 201(1) and 201(1A) of the Act. The Assessing Officer invoking the provisions of Section 194C of the Act treated the assessee as assessee in default under Section 201(1) and created a demand of ₹9,88,382/- and also charged interest under Section 201(1A) of the Act amounting to ₹8,80,061/-. Aggrieved, assessee preferred appeal before the learned CIT(A). The learned CIT(A), relying on the decision of Hon'ble Jurisdictional High Court in the case of Puri Construction Pvt.Ltd. – (2024) 462 ITR 326 (Delhi), has held as under:-
“Held that the objection raised on the maintainability of writ petitions, which had not been raised at the first instance, on the ground that the orders passed under section 201 were appealable under the provisions of the Act was unsustainable since most of these writ petitions were entertained as far back as in 2019 and 2021 and after hearing the respective parties, the court had passed interim orders. Therefore, it would be wholly inequitable to relegate the assessees to pursue an alternative remedy. Since the parties had addressed submissions on the merits of the questions which arose and the jurisdictional challenge that stood raised, there was no justification to accept the objections raised.. That merely because the external development charges were determined and directed to be paid by the Directorate of Town and Country Planning, it did not deprive the payment of its intrinsic characteristic, namely, of being a payment made to the Authority. The submission of a lack of privity between the assessees and the Authority was to be rejected since section 1940 did not contemplate the existence of a contractual relationship between a person who was responsible for paying a sum and the contractor as defined in that provision. The existence of a contract was only envisaged to be a factor pertinent to an arrangement which the contractor had with a specified person. That a statutory obligation to carry out external development could not be doubted since the 1977 Act envisaged the Authority as being an authority charged with undertaking external development works in all areas falling Trehan Promoters & Builders [A.Y 2015-16] within an urban area and had been constituted as a specialised agency to carry out external development works in colonies and areas. The communication, dated June 19, 2018, of the Directorate of Town and Country Planning evidenced an acknowledgment of the Authority undertaking external development work in and around a colony or area. It had admitted to an arrangement which was in existence up to March 31, 2017 in terms of which the Directorate of Town and Country Planning collected external development charges from colonisers in the form of a bank draft drawn in favour of and sent to the Authority which was an executing agency working for and on behalf of the State Government for which funds were provided to the Authority through the Directorate of Town and Country Planning, and that since receipts formulated a new scheme and for which appropriate budgetary provisions were made on account of external development charges were found to be insufficient, it had for execution of all external development works by it. It was on the promulgation of such scheme that the external development charges with effect from the financial year 2017-18 were deposited directly with the State Government and constituted a part of the consolidated fund of the State. Post the promulgation of that scheme all payments towards external development charges were made through the Directorate of Town and Country Planning and the required funds for execution of development works were thereafter released to the Authority upon sanction being granted by the Finance Department of the State Government. This communication therefore, evidenced that all external development charges were made to the Authority, at least prior to March 31, 2017 pursuant to an understanding that those funds would be utilised towards external development. All the payments having been made to the Authority under the directives of the Directorate of Town and Country Planning, they were directed towards subserving an arrangement existing between the Authority and the State Government for external development works being carried out by the former. Though this arrangement did not stand encapsulated in a formally executed contract or instrument, there was in existence an understanding between the State Government and the Authority for external development work being executed by it and for the funds remitted to it being utilized for such purposes. Therefore, the external development charges were payments made directly to the Authority and prior to the Trehan Promoters & Builders [A.Y 2015-16] financial year 2017-18. In terms of the provisions of the 1977 Act read with the Rules and the statutory obligations placed upon the Authority, there was in existence an understanding or an arrangement between the Authority and the State Government for the execution of external development works. The existence of a contract was to be construed from the arrangement which existed between the Authority and the State Government and having been duly acknowledged by the Directorate of Town and Country Planning itself, the absence of a written or codified agreement would not be relevant for the applicability of section 194C. That merely because an exercise of quantification was undertaken by the specified person, it would have no bearing on the applicability of section 194C. Not only the provisions of the 1977 Act, but also the forms and bilateral agreements executed by applicants, mandated that all payments of external development charges were to be drawn in favour of the Authority. Although they were routed through the Directorate of Town and Country Planning, those payments undoubtedly were to the account of the Authority. The statute as well as the licence conditions thus placed the assessees under a binding obligation to advance all external development charges payments in favour of the Authority. These qualified the responsibility which section 194C placed upon a payer who made payments to a contractor. The fact that external development charges were determined, computed or were recoverable by the Directorate of Town and Country Planning was wholly inconsequential since section 194C was solely concerned with a payment being made to a contractor who had an arrangement with a specified person. The moment the assessees effected a payment in favour of the Authority in connection with the external development work which was to be executed by it pursuant to the arrangement that existed between the entity and the State Government, the provisions of section 194C stood attracted. That the liability to deduct tax according to the provisions of sections 197 and 197A, stood effaced only if a recipient obtained a certificate of exemption or where a beneficiary produced a certificate which obliged the payer to deduct tax at a rate lower than that prescribed. The Authority had neither obtained certification as contemplated under these provisions nor had obtained a declaration that moneys received by it were exempt from tax. Therefore, the assessees did not stand absolved of the obligation to deduct tax on payments that were Trehan Promoters & Builders (A.Y 2015-16) being made to the Authority. That the mere constitution of the Authority by a statutory enactment did not make it "Government".
The Authority did not fall within the ambit of clause (1) or clause (3) of section 196. The external development charges payment made to the Authority was not a payment made to the State, the income having been placed in the hands of the Authority at its disposal. Even according to the Directorate of Town and Country Planning external development charges were made in favour of the Authority till March 31, 2017 and only thereafter the payments were deposited with the Directorate of Town and Country Planning. Even if the Authority discharged functions akin to or similar to governmental obligations or performed activities closely connected with State functions, it would not result in recognising it as "Government" immune from taxation under article 289 of the Constitution of India. That section 196 is not dependent upon a directive to pay. It is only concerned with whether the payment is made to a Government or an authority specified therein. The fact that arrears of external development charges could be recovered as arrears of land revenue was immaterial. Section 10A was merely a mode of recovery of external development charges. Even if that provision were to elevate external development charges to a statutory levy, it would not be determinative of whether the payment fell within the scope of section 196. The amount paid would be exempt from the rigours of tax deduction at source only if it was made to a category of entities specified. That there was no justification to invoke the prerogative writ powers on the issue of show-cause notices since the assessees in the course of proceedings had been afforded adequate opportunities to establish that section 1940 would not be attracted and the issue of its applicability also had been raised in the counter affidavits which were filed and the assessees had adequate notice. Therefore, the principles of prejudice were not attracted and it would be inappropriate to interfere with the notices on this ground That the final orders passed under section 201 were to be quashed and set aside. The legal position of penalty be it either under section 221 or 271C was not an inevitable corollary in case of default and the position was made explicit by the second proviso to section 221 and section 2738. The imposition of penalty where a question with respect to taxability had remained unclear or where an assessee had good and sufficient cause not to deposit the tax, Trehan Promoters & Builders [A.Y 2015-16] was subject to due verification of whether any final orders had been passed against any of the assessees and the scope of a person in default and penalty provisions.
Accordingly, learned CIT(A) dismissed the appeal of the assessee on the issue of Section 201(1) of the Act. As regards interest under Section 201(1A) of the Act, learned CIT(A) remanded the matter back to the file of the Assessing Officer as the Assessing Officer has not verified as to whether parties were identifiable or whether the provisions were made on a scientific and ascertainable basis linked to specific payees. Aggrieved, assessee is in appeal before the Tribunal.
Before us, the learned Counsel for the assessee relied on the decision of this Tribunal in the case of Deputy Gothwal Constructions (P.) Ltd. Vs. DCIT – (2025) 181 taxmann.com 771 (Delhi-Trib.), wherein the matter was remanded back to the Assessing Officer for verifying whether the conditions mentioned in the first provision to Section 201(1) have been fulfilled or not. The Tribunal in the said case of Deputy Gothwal Constructions (P.) Ltd. (supra) has held as under:-
'4. We have carefully considered the rival submissions and have gone through the records before us. We have also perused the documents in the paper book filed by the assessee and the case laws relied upon by the Ld. AR. Right at the outset, it needs to be mentioned that the assessee did not make any significant presentation of facts before either of the authorities below. Thus, prima facie, the case of Puri Constructions (supra) would hold fort in this case. We are conscious of the fact that there could be a factual distinguishing feature in as much as a plain reading of the Puri Construction case (supra) reveals that the appellant there was apparently the license holder for the proposed development, whereas in this case it appears that the license has been granted individually to 17 persons. Since there is absolutely no fact finding at the lower level in this regard we are unable to comment on whether this distinguishing feature could lead to a different view than whatever has been propounded in the Puri Construction case (supra) by the Hon'ble Jurisdictional High Court. However, the alternative submission of the Ld.AR that HUDA would be filing its returns of income and would be showing the receipts on account of EDC thereon, has considerable persuasive value since it is not only the Hindustan Coca Cola case (supra) but also a subsequent amendment in section 201(1) where a proviso has been inserted w.e.f. 01.07.2012 where a person would not be in default in case the payee has (i) furnished his return of income u/s 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income. There is also a directive in this section that the person needs to furnish a certificate to this effect from an Accountant in such form as may be prescribed. Accordingly, we deem it fit to set aside the impugned order and remand this matter back to the file of Ld. AO for verifying whether the conditions mentioned in the first proviso to section 201(1) of the Act have been fulfilled or not. In case the said conditions have been fulfilled, then the assessee cannot be saddled with any liability u/s 201(1)/201(1A) of the Act."
When these facts were confronted to the learned Senior DR, he could not controvert the above fact situation and relied on the assessment order and order of learned CIT(A).
After hearing the arguments of both the sides and perusing the facts of the case, it is observed that the only grievance of the assessee is that let the conditions stipulated under the provisions of Section 201(1) of the Act be verified and for that, he only requested for remitting the matter back to the file of the Assessing Officer. Accordingly, we remit the matter back to the file of the Assessing Officer and the Assessing Officer is directed to verify the conditions stipulated to the first provision to Section 201(1) of the Act vis-a-vis the facts of the case in terms of the decision of the Coordinate Bench of the Tribunal in the case of Deputy Gothwal Constructions (P.) Ltd. (supra).
In the result, the appeal of the assessee in ITA No.6794/Del/2026 is allowed in the above terms and ITA No.6795/Del/2026 is allowed for statistical purposes.